Essential Properties Realty Trust (EPRT): A Dividend Machine Built to Deliver

Income investors seeking steady returns and capital preservation face a critical question: Can a dividend increase today signal a decade of growth tomorrow? For Essential Properties Realty Trust (NYSE: EPRT), the answer is an emphatic yes. The company's June 2, 2025, announcement of a $0.30-per-share quarterly dividend—marking its 7th consecutive annual hike—provides a rare glimpse into a REIT engineered for long-term income stability. With a robust portfolio, fortress-like balance sheet, and a focus on recession-resistant sectors, EPRT is primed to outperform in both strong and turbulent markets. Here's why this dividend increase isn't just a blip—it's a bellwether for sustained growth.

A Portfolio Built for Stability

EPRT's dividend resilience begins with its portfolio. As of March 2025, the REIT owns 2,138 freestanding net-lease properties spread across 49 states, leased to 423 tenants operating in 604 distinct business concepts. This diversification isn't just geographic—it's sectoral. EPRT targets service-oriented and experience-based industries, including healthcare, education, and convenience retail, which are less sensitive to economic cycles. The weighted-average lease term of 14.0 years ensures stable cash flows, while a 99.7% occupancy rate underscores tenant demand.

But what truly sets EPRT apart is its rent coverage ratio of 3.5x. This metric—the ratio of a tenant's revenue to its rent obligations—means most tenants generate more than three times the rent required to cover their leases. In a rising interest rate environment, this buffer protects against defaults and ensures steady income.

Financial Fortitude: The Backing for Growth

The dividend increase isn't just about portfolio strength—it's rooted in financial discipline. EPRT's revenue grew 25.32% over the past year, driven by strategic acquisitions and organic lease renewals. Its current ratio of 2.95—well above the 2.0 threshold for liquidity—suggests it can easily cover short-term liabilities. Moody's recently upgraded its senior unsecured ratings to Baa2, citing improved leverage and cash flow.

Even in Q1 2025, when EPS slightly missed estimates ($0.29 vs. $0.30), EPRT beat revenue expectations by $9.2 million, reaffirming its $1.85–$1.89 2025 AFFO guidance. This consistency matters: income investors care less about quarterly swings and more about reliability.

Dividend Growth: A Track Record, Not a Mirage

EPRT's dividend history speaks louder than any single quarter's results. Over the past seven years, it has increased its payout every year, with the latest hike bringing the annualized yield to 3.63%—well above the average REIT yield of 3.2%. The $0.02-per-share increase may seem modest, but it reflects a deliberate strategy: grow dividends at a pace that outlasts economic cycles.

Crucially, EPRT's dividend is self-funded. With a payout ratio of just 63% of AFFO (vs. an industry average of ~80%), there's ample room to grow without overextending. This creates a “moat” against future downturns.

Analysts and Institutions Are on Board

Goldman Sachs recently raised EPRT's price target to $38, citing its strategic acquisitions—like the $275 million deal to acquire 30 healthcare facilities in 2024—and its diversified tenant base. Meanwhile, InvestingPro's “GREAT” rating highlights its low leverage (debt-to-EBITDA of 5.1x) and operational scale.

The company's $6.47 billion market cap also offers a buffer against volatility. Unlike smaller REITs, EPRT can weather tenant defaults or sector-specific headwinds without compromising its dividend.

Why Act Now?

For income investors, the case for EPRT is clear:
- Safety: A portfolio of long-term leases in defensive sectors.
- Growth: 25% revenue expansion and a 3.6% dividend yield with room to rise.
- Catalysts: Moody's upgrade, analyst upgrades, and a reaffirmed AFFO outlook signal confidence.

Final Call: A Dividend Machine for the Next Decade

EPRT isn't just a dividend stock—it's a dividend engine. Its blend of geographic diversification, fortress balance sheet, and tenant resilience makes it a rare find in today's market. With a track record of seven straight hikes and a payout ratio that leaves room to grow, this REIT is positioned to deliver consistent income for years.

For income-focused investors, the question isn't whether to act—it's why wait? EPRT's June dividend increase isn't a one-off. It's the first step in a long march upward.

Investment thesis: Buy EPRT for dividend stability, growth potential, and defensive sector exposure. Target price: $38 (Goldman Sachs) with a 3.6% yield.